The Basics of Singapore Corporate Tax
Singapore follows a territorial basis for taxation, meaning companies are taxed on the income generated within the country. The tax system is progressive, and the current headline Corporate Tax Rate in Singapore is 17%. This rate is applicable to both local and foreign companies, and it has remained unchanged since 2010.
Notably, the government offers a variety of tax incentives and exemptions to encourage businesses to thrive. The Partial Tax Exemption and the Newly Incorporated Company Tax Exemption are two such initiatives that significantly reduce the effective tax rate for small and medium-sized enterprises (SMEs) in Singapore.
Partial Tax Exemption
Under the Partial Tax Exemption scheme, qualifying companies can enjoy tax exemptions on their chargeable income as follows:
75% exemption on the first S$10,000
50% exemption on the next S$190,000
For instance, under the partial tax exemption method, if your company had a taxable income of $185,000, you would have to pay (10,000 x 4.25%) + (175,000 x 8.5%) = 15,300 SGD (as opposed to 31,450 SGD when using the tax rate of 17%).
Newly Incorporated Company Tax Exemption
The Newly Incorporated Company Tax Exemption is designed for newly established Singapore companies. To qualify, a company must meet the following criteria:
Be incorporated in Singapore
Be a tax resident in Singapore for that year of assessment
Have no more than 20 shareholders, with at least one individual shareholder holding at least 10% of the shares
When your newly established company satisfies the aforementioned requirements, it will be eligible for a 75% tax exemption on the first $100,000 of taxable income and a further 50% tax exemption on the following $100,000 of taxable income.
The Benefits of Singapore Company Tax
The competitive Corporate Tax Rate in Singapore offers several advantages for businesses:
Lower tax burden: The corporate tax rate is among the lowest in the world, ensuring that companies can retain more profits for reinvestment or distribution to shareholders.
Ease of compliance: Singapore's tax system is simple and transparent, with a well-established framework and efficient online tax filing procedures, making it easier for businesses to comply with regulations.
International tax agreements: Singapore has a vast network of Double Taxation Agreements (DTAs) and Free Trade Agreements (FTAs), which help to prevent double taxation and lower withholding tax rates on cross-border transactions.
Tax incentives and exemptions: The various tax incentives and exemptions available for companies further reduce the effective tax rate and promote business growth.
The attractive Singapore Corporate Tax Rate, coupled with the country's pro-business environment and robust legal framework, make it an ideal location for businesses looking to establish a presence in Asia. If you are considering setting up a company in Singapore, BBCIncorp is your trusted partner. We offer professional services tailored to your needs, ensuring a seamless incorporation process, and provide ongoing support to help your business thrive in this dynamic city-state. Contact BBCIncorp today to begin your journey to success in Singapore.
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